Becoming a Revenue Driven Business Model through Data is Painful for Government Agencies

Recently, I presented a Business Value Assessment to a client. The findings were based on a revenue-generating state government agency. Everyone at the presentation was stunned to find out how much money was left on the table by not basing their activities on transactions, which could be cleanly tied to the participating citizenry and a variety of channel partners. There was over $38 million in annual benefits left over, which included partially recovered lost revenue, cost avoidance and reduction. A higher data impact to this revenue driven business model could have prevented this.

Should government leaders go to the “School of Data” to understand where more revenue can be created without necessary tax hikes? (Source:creativecommons.org)

Given the total revenue volume, this may seem small. However, after factoring in the little technology effort required to “collect and connect” data from existing transactions, it is actually extremely high.

The real challenge for this organization will be the required policy transformation to turn the organization from “data-starved” to “data-intensive”. This would eliminate strategic decisions around new products, locations and customers relying on surveys that face sampling errors, biases, etc. Additionally, surveys are often delayed, making them practically ineffective in this real-time world we live in today.

Despite no applicable legal restrictions, the leadership’s main concern was that gathering more data would erode the public’s trust and positive image of the organization.

To be clear; by “more” data being collected by this type of government agency I mean literally 10% of what any commercial retail entity has gathered on all of us for decades. This is not the next NSA revelation as any conspiracy theorist may fear.

While I respect their culturally driven self-censorship despite no legal barricades, it raises their stakeholders’ (the state’s citizenry) concern over its performance. To be clear, there would be no additional revenue for the state’s programs without more citizen data. You may believe that they already know everything about you, including your income, property value, tax information, etc. However, inter-departmental sharing of criminally-non-relevant information is legally constrained.

Another interesting finding from this evaluation was that they had no sense of conversion rate from email and social media campaigns. Impressions from click-throughs as well as hard/soft bounces were more important than tracking who actually generated revenue.

This is a very market-driven organization compared to other agencies. It actually does try to measure itself like a commercial enterprise and attempts to change in order to generate additional revenue for state programs benefiting the citizenry. I can only imagine what non-revenue-generating agencies (local, state or federal) do in this respect. Is revenue-oriented thinking something the DoD, DoJ or Social Security should subscribe to?

Think tanks and political pundits are now looking at the trade-off between bringing democracy to every backyard on our globe and its long-term, budget ramifications. The DoD is looking to reduce the active component to its lowest in decades given the U.S. federal debt level.

Putting the data bits and pieces together for revenue

A recent article in HBR explains that cost cutting has never sustained an organization’s growth over a longer period of time, but new revenue sources did. Is your company or government agency only looking at cost and personnel productivity?

Disclaimer:

Recommendations and illustrations contained in this post are estimates only and are based entirely upon information provided by the prospective customer and on our observations and benchmarks. While we believe our recommendations and estimates to be sound, the degree of success achieved by the prospective customer is dependent upon a variety of factors, many of which are not under Informatica’s control and nothing in this post shall be relied upon as representative of the degree of success that may, in fact, be realized and no warranty or representation of success, either express or implied, is made.